YOU ARE HERE: LAT HomeCollections

Zell closes deal for The Times

Tycoon plans to give Tribune properties greater local control. The unusual transaction involves heavy debt.

December 21, 2007|Thomas S. Mulligan and James Rainey | Times Staff Writers

CHICAGO — For the second time in eight years, control of the Los Angeles Times changed hands Thursday, passing from a staid Chicago conglomerate to a private company headed by an unpredictable and colorful billionaire, in a debt-heavy deal that creates tremendous opportunities and risks for one of America's top newspapers.

New Chairman and Chief Executive Sam Zell took the reins of Tribune Co. and promised a broad shake-up that would decentralize power to The Times and other local business units, which include KTLA-TV Channel 5, the Chicago Tribune and nearly 30 other newspapers and television stations. Employees and civic leaders in L.A. greeted completion of the $8.2-billion transaction and the promise of local control with cautious optimism. Zell's verve and professed confidence in the news business charmed them, even as they worried that the company's onerous financial obligations might force staff cuts that would diminish The Times.

The unusual deal gives Tribune's 20,000 employees the lion's share of the newly private company's stock while pushing further into the rear-view mirror the nearly 120-year ownership of The Times by the Chandler family, who turned the newspaper into a political, economic and journalistic powerhouse.

The newspaper's new master obviously hopes that his timing is better than Tribune's. It was not long after the Chicago company purchased The Times and the rest of Times Mirror Co. in 2000 that the newspaper industry began to suffer a revolutionary decline: the loss of droves of readers and advertisers to the Internet.

Tensions over subsequent staff cuts led two publishers and two editors to leave the newspaper in less than two years -- a rift with the Chicago owners that made The Times a case study of the woes besetting the industry.

Zell, 66, has been telling his prospective employee-partners for months that he would not dwell on the failures of the past. His liberal use of profanity drove the point home. Zell said that he planned to end an era of diminished expectations by building on marquee brands such as The Times and the Chicago Tribune and that he had trumped conventional wisdom before.

"I'm sick and tired of listening to everybody talk about and commiserate over the end of newspapers," he said Thursday. "They ain't ended and they're not going to end. I think they have a great future."

As to the newspaper analysts and industry experts predicting layoffs and tough times ahead, Zell noted that they had already been proven wrong once -- in believing that fast-declining revenue would prevent him from financing the transaction to take control of Tribune.

"If you look at my track record, I haven't spent much time disassembling anything," Zell said in an interview Wednesday, "and I've spent my entire career building things."

Those remarks came during an hourlong interview in his cluttered, whimsical office in the Art Deco former headquarters of the Chicago Daily News, the bare-knuckles afternoon daily that failed in 1978 after more than a century in business.

Zell, a Chicago native, first showed his knack for making money as a child, when he bought Playboy magazines downtown and resold them at a considerable markup to his friends in the suburbs.

He got into real estate in law school and proved to have a keen eye for distressed properties with potential. He sold his Equity Office Properties Trust to a private equity firm about a year ago for $39 billion including debt, the largest real estate deal ever.

Zell likes to tell people in Los Angeles that he is no stranger to the city, having made his first real estate deal here in the 1970s. He flies frequently on his private jet to stay at a home that sits on a spectacular point at the end of Malibu's Broad Beach.

Among those who had vied for Tribune and the Los Angeles Times were three Los Angeles billionaires -- Eli Broad, Ron Burkle and David Geffen -- who said they hoped to return the newspaper to local ownership. Partners Broad and Burkle complained last spring when Zell became the favored bidder, saying he had special inside information. The protest went nowhere.

A new style became immediately evident on day one of the Zell regime. Wearing jeans and an open collar at his first news conference as CEO, Zell looked out at Tribune executives who had dropped their customary neckties.

In a more significant explosion of the sober Tribune culture, he named a group of new executives and directors from the worlds of entertainment and communications and replaced most members of a board that he said had been filled with "burghers" from Chicago's business and social elite.

Among the new hires: former "shock radio" impresario Randy Michaels, who will become one of two top operating managers. Included on the board: Hollywood agent Jeff Berg and Las Vegas publishing, gambling and real-estate entrepreneur Brian Greenspun. Greenspun's family also made "a significant investment" in Tribune, the company disclosed Thursday.

Los Angeles Times Articles